For sale — 09/04/08

September 03, 2008 07:26 pm

— While times are good at Marathon Oil’s Catlettsburg Refinery, and most of the other 149 oil refineries in the U.S., the future is uncertain at Kentucky’s only other refinery. In fact, whether the small Somerset Refinery ever produces another gallon of gasoline or refines another quart of motor oil could well depend on the results of an auction slated for later this month as part of a bankruptcy proceeding.
Even Edward Durnil, the court-appointed auctioneer at Tranzon Asset Advisors, admits he doesn’t know how the auction of the tiny 5,500-barrel a day refinery will go. That’s because refinery sales are rare in this country.
“I’ve heard estimates everywhere from $5 million to $6 million to ‘the sky’s the limit,”’ Durnil said. He’s not even sure any buyers are interested in the refinery, and if they are, whether it is to reopen it or to move parts of it elsewhere.
One thing is certain: The refinery is important to the economy of Somerset and southern Kentucky. The refinery may be small, but it employed 178 people at the time it ceased operation. The desire to get those jobs back is why Carroll Estes, executive director of the Somerset Pulaski Development Foundation, plans to be at the auction to let potential bidders know “we have some incentives if they put it back in operation.”
The refinery also is important to the small oil wells along the Kentucky and Tennessee border that just recently began pumping oil after years of inactivity. Rising oil prices suddenly made the small wells — some capable of pumping only a few barrels a day — profitable for the first time in decades. However, being able to have that small amount of oil refined in Somerset is a key part of that profitability. The wells simply do not produce enough oil to transport it hundreds of miles to another refinery.
Whether Somerset Refinery will re-open is a business decision that only its new owner — assuming one can be found — can make. But at a time when this nation has what many consider to be a serious lack of refining capacity, it would be a step backwards to allow a refinery — no matter how small — to close.